New Rules Impact Military Lending, Are You Prepared?

TRID is behind us, but new regulation is still to come. For example, Quandis, Inc., a provider of default management software and services, has released a technology solution to help lending organizations comply with changes to the Military Lending Act (MLA) that takes effect on Oct. 3, 2016. The MLA provides a number of new rules set forth by the Department of Defense (DoD) that impacts lenders working with active duty service members and their dependents. Failure to adhere to the DoD’s amended compliance rules can result in severe repercussions.

On July 22, 2015, the DoD finalized an amendment to the Military Lending Act of 2007, which entails crucial new rules that lenders must follow when dealing with active military personnel. The MLA rules apply to certain loans provided to “covered borrowers.”  The term covered borrowers consists of consumers who, at the time they become obligated on the extension of credit, are members of the armed forces serving on active duty or active guard and reserve duty, along with their dependents.

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Loans covered by the rule include:

>>Unsecured closed-end loans

>>Non-purchase-money secured closed-end loans

>>Unsecured consumer lines of credit

>>Credit cards

Quandis’ solution provides a real-time API that searches the DoD’s database to instantly return covered borrower status in either human or machine-readable formats. Supporting high concurrency and average response times well under one second, the API is ideally suited to integrate with automated underwriting systems (AUSs). Unlike most search solutions, Quandis’ technology parses name permutation data to search on a very granular level for active duty personnel as well as their dependents, ensuring comprehensive searches so that nothing is missed.

“Our ability to leverage the technology we have already developed to adhere to the Servicemembers Civil Relief Act (SCRA) for active duty military status, and apply that knowledge and technology to the MLA is a natural extension for us,” says Scott Stoddard, CEO of Quandis. “Anyone dealing with debt when it comes to covered borrowers must comply with the MLA. Compliance is king and this new offering provides a critical safe harbor for lending organizations working with service members.”

Quandis provides a DoD-certified tracking number, along with a time and date stamped audit trail for users in the event of an audit or issue to demonstrate proof of MLA “safe harbor” compliance. The company’s MLA compliance solution is already in production with several lending entities.

Notable is that a record number of complaints made by service members to the CFPB has been recorded recently. In 2015, the CFPB received 19,000 complaints from service members, veterans and their families, which represented a 13 percent increase from 2014. The top three areas for complaints were debt collection (46 percent), mortgage reporting (15 percent) and credit reporting (11 percent).

Lending entities need to start preparing in advance to comply with the MLA amendments as opposed to waiting until the Oct. 3 deadline.

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.